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Hurricane Risk and Asset Prices
Type
conference paper
Date Issued
2021-10
Author(s)
Abstract (De)
We examine hurricane exposure as a systematic risk factor in the US stock market. Motivated by
a consumption-based asset pricing model with heterogeneous agents, we derive a necessary and
sufficient condition for a hurricane risk premium in the cross-section of stock returns. Empirically,
we find that – in the period from 1995 to 2020 – stocks that react negatively to aggregate
hurricane losses outperform stocks that react positively by almost 9% p.a. The hurricane premium
is not explained by standard asset pricing risk factors nor stock characteristics. Our
results emphasize the importance of climate risk for firms’ cost of capital.
a consumption-based asset pricing model with heterogeneous agents, we derive a necessary and
sufficient condition for a hurricane risk premium in the cross-section of stock returns. Empirically,
we find that – in the period from 1995 to 2020 – stocks that react negatively to aggregate
hurricane losses outperform stocks that react positively by almost 9% p.a. The hurricane premium
is not explained by standard asset pricing risk factors nor stock characteristics. Our
results emphasize the importance of climate risk for firms’ cost of capital.
Language
English
HSG Classification
contribution to scientific community
Event Title
DGF 2021 Annual Meeting
Event Location
Innsbruck
Event Date
30.09.2021-2.10.2022
Subject(s)
Contact Email Address
julia.braun@unisg.ch
Eprints ID
267871